Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Facebook Inc Dips Its Toe Into Music Streaming

Facebook unveiled a new feature that lets you stream music right in the app.

Music is a social art form. People play music together, they listen to music together, and they dance to music together. Facebook (NASDAQ: FB) now wants to make it easier to hear the songs your friends love, so it's introducing "Music Stories." Music Stories allow users to playback a 30-second clip of a song shared by a friend from a music streaming service like Spotify. Facebook says more music services are coming later.

Twitter(NYSE:TWTR) has tried to integrate music with its social network several times in the past. It tried #Music -- a dedicated app for music shared on the social network -- a couple of years ago, and last year it introduced Audio Cards, which let third parties integrate audio into Twitter. Neither has proved particularly popular. Will Facebook's latest effort be any different?

Testing, testing, 1, 2, 3Facebook isn't jumping into the deep end with music, as many have suggested it would eventually try to do. Reports surfaced this summer that Facebook was in talks with record labels, and the rumor mill started up saying Facebook was working on a music-streaming service. I guessed that Facebook was looking to cover its bases for music found in videos, similar to how Alphabet's (NASDAQ:GOOG)(NASDAQ:GOOGL) YouTube struck a deal to allow creators to use copyrighted music in their videos. Perhaps it was looking into licensing costs for something along the lines of Music Stories if its partnerships with music streaming services fell through.

It's important to note that Facebook is taking almost no risk with its test. It seems as though the music streaming services are picking up the licensing fees, and it's only testing the feature with select iOS users. If the reaction is positive, Facebook can expand to more streaming services and more users.

If the test proves popular, Facebook could even look into licensing songs itself and enabling users to stream full music videos on its website and app. Earlier this year, the company was testing a video viewer that "popped out" of the News Feed, so users could continue reading through their News Feed as the video played. This is similar to how Twitter works with Audio Cards, and it's the perfect format for full-length music videos.

Facebook's slow testing approach is markedly different from Twitter's initial efforts with #Music. After finding that sharing music was one of the more popular activities on Twitter, the team put together a full app instead of testing different features with its users. Of course, with 1.55 billion users, Facebook can afford to segment and test a lot of things. With its user base of 200 million users at the time it rolled out the app, Twitter didn't have the same luxury.

Potential to take on YouTubeDuring Facebook's third-quarter earnings report, Mark Zuckerberg told investors that the platform was seeing more than 8 billion daily video views. That's similar to the amount of views on YouTube. What's more, a significant percentage of YouTube's video views are music videos, so if Facebook can eventually become a place to listen to and watch music videos, it could cut deeper into YouTube's territory.

Music videos are much easier to monetize than the videos users are used to seeing on Facebook. Facebook is already working on a suggested-videos feed and an autoplay feature that queues up the next song. It could easily insert a video ad in between. Music streamers have come to expect advertisements in their online listening experience.

Facebook has also revamped its search engine, which would make finding music easier, and could sort results based on friend recommendations. That social feature is something missing from most streaming services, and those that do have a social feature don't have the network of Facebook backing it up.

YouTube, meanwhile, is doubling down on music with the recent release of a dedicated music app and a subscription service, YouTube Red, that removes ads from all YouTube videos.

I'm not saying Facebook is going to start streaming music in the near future, but it's certainly heading in that direction. The streaming-music industry is a $2 billion market in the United States, and it's growing quickly. With a massive audience, Facebook could be well positioned to grab a piece of that market if that's something users express interest in. The key is to test to make sure it's something they want before inking any expensive deals.

Author

Adam has been writing for The Motley Fool since 2012 covering consumer goods and technology companies. He consumes copious cups of coffee, and he loves alliteration. He spends about as much time thinking about Facebook and Twitter's businesses as he does using their products. For some lighthearted stock commentary and occasional St. Louis Cardinals mania ... Follow @admlvy